PM makes veiled attack on Defense Min. at gov't meeting; Israel said to agree in principle to Hamas truce.

In a veiled attack on Defense Minister Ehud Barak, Prime Minister Ehud Olmert on Sunday denied that political considerations were delaying a decision on whether to agree to a proposed truce with Gaza militant groups or to launch a broad military operation in the coastal Strip.

Olmert stated that whoever claims political considerations are preventing any type of action in the Gaza Strip is simply projecting his own faulty perceptions.

The prime minister was hinting at Barak's recent linking of the political crisis currently engulfing Olmert's Kadima party with a delay in the agreement on a cease-fire with Hamas.

"Last Wednesday the Security Cabinet made decisions regarding the Gaza Strip. As you know, this issue has topped our agenda for a very long time," Olmert added, speaking at the weekly cabinet meeting Sunday.

"The continuation of terrorism from Gaza ? Qassam terrorism, suicide attacks, infiltrations and shooting ? is intolerable. The Government of Israel has reiterated that we must uphold the most fundamental obligation of all governments toward their citizens, i.e. a response to their security problems, a halt to the daily threats that disrupt the lives of the many residents who live in that area," he said.

The prime minister also reiterated that advancing the release of captive Israel Defense Forces soldier Gilad Shalit, who has been held in Gaza since 2006, is an inseparable part of the effort to achieve calm in the south.

Barak, who is also the Labor Party chairman, threatened on Thursday that he would call for the dissolution of Knesset and preparation for general elections, unless Kadima follows through and expedites its party primaries.

The calls for a Kadima leadership contest were triggered by an ongoing investigation into claims that Olmert took as much as $150,000 from a Jewish-American businessman over a two-decade period.

Meanwhile, security and government sources said on Saturday that Israel has agreed in principle to an Egyptian-mediated proposal for a cease-fire and the opening of intensive talks for the release of kidnapped soldier Gilad Shalit.

The sources said that Defense Ministry official Major General (res.) Amos Gilad has relayed Israel's positions to Egyptian intelligence chief General Omar Suleiman.

A delegation of Hamas leaders was to meet Sunday in Cairo with Suleiman to hear Israel's position. The delegation is headed by the Damascus-based deputy chief of Hamas' political wing, Musa Abu Marzuk, and senior Hamas leaders from Gaza.

According to the outlines of the deal, Egypt will announce that Hamas and the other armed groups in Gaza have decided on a cease-fire, and Israel will stop responding to fire from Gaza. Israel has not agreed to Hamas' demand to extend the cease-fire to the West Bank but has told the Egyptians that quiet in Gaza will reflect on the chances for quiet in the West Bank as well.

Israel has also refused to agree to Hamas' demand that the cease-fire agreement include an opening of the border crossings into Gaza, but has said it will ease the economic blockade of the Strip.

The Rafah crossing is under Palestinian-Egyptian control. However, Egypt reportedly wants to open it only as part of the agreement with Israel. Israel apparently wants to delay the opening of the Rafah crossing until significant progress is made in a prisoner swap.

Hamas spokesmen last week said Shalit would be released only in exchange for Palestinian prisoners held in Israel, and not as part of the cease-fire agreement.

On Saturday, the London-based Arabic daily Asharq Alawsat reported that Israel had agreed to forego a link between Shalit's release and the cease-fire. Gilad's father, Noam Shalit, said Israeli officials have assured him that his son's release is an integral part of cease-fire discussions.

Israel is reportedly willing to exchange Shalit for 450 terrorists, to be released in two stages.

Weekend mortar attacks

Palestinians fired three mortars and two anti-tank missiles at Israel Defense Forces soldiers patrolling the security fence around the Gaza Strip on Saturday. There were no injuries, but one missile struck an IDF bulldozer.

Earlier Saturday, a volley of three mortars was fired at Israel, causing no damage or injuries. On Friday night, an Israel Air Force missile targeted two armed terrorists in the area of Beit Hanun in the northern Gaza Strip, but missed its mark.

Earlier Friday, three mortars were fired from the Gaza Strip; two exploded in the vicinity of Kibbutz Kissufim and one struck near Kibbutz Nahal Oz. No injuries or damage were reported.

Meanwhile, in the West Bank Saturday morning, IDF special forces blockaded the village of Deheisha near Bethlehem where prior intelligence had pinpointed the location of a senior terror leader. The IDF said some 200 Palestinians threw stones and explosive devices at the troops and IDF forces responded with crowd control measures as well as live fire.

Also Friday, IDF sources said that soldiers had shot a Palestinian youth in the leg when they saw him trying to cut the West Bank separation fence during an anti-fence protest in Bil'in.